Driven by acquisitions, Bonadio Group keeps growing

Perinton-based accounting giant Bonadio Group has expertise in everything from auditing and business valuation to asset allocation consulting.

But it's greatest talent may lie in addition.

The firm has worked its way up the ranks of the largest accounting firms in the nation through a long line of acquisitions. Over the past 12 months alone, it moved into Utica with acquisition of a firm there, purchased bank internal auditing firm Independent Audit Associates of Vermont, and became one of the largest accounting firms in Buffalo by acquiring Gaines Kriner Elliott LLP.

On Dec. 1, it will absorb an Albany firm — Stulmaker, Kohn & Richardson — adding two partners and five other employees to its Capital Region operations.

The 35-year-old accounting firm, the largest in the Rochester region, was 54th on the Inside Public Accounting's 2013 Top 100 Firms — an annual ranking of firms based on revenues. Bonadio was up from 59th, the year before, and had annual revenues of nearly $55 million, according to the rankings.

Today, Bonadio has a dozen offices stretching from Erie County across Perry and Geneva, through the Syracuse area and into Manhattan. And plans to keep adding others elsewhere. All with the goal of having plenty of expertise and specialties to offer clients and opportunities to move up to offer staff, said CEO/founder Thomas Bonadio.

"Getting to a certain level is not really important to us," Bonadaio said. "But continuing to grow creates opportunities for our people. And we have more products to bring to our clients. If you have growth and create opportunity, your people see they can move forward, you get good people and good service that leads to more clients. It's a cycle of momentum. I never want somebody ready to advance in our business and we say that opportunity is not there until someone leaves or passes away."

A growing number of accounting firms are turning their green eye shades and pencils toward doing the math on mergers and acquisitions of each other. More than 40 percent of U.S. accounting firms were in merger talks or expected to be so within a couple of years, according to a 2012 survey by the American Institute of Certified Public Accountants.

Why? Many of the firms looking to be acquired are headed by Baby Boomer-age partners headed for retirement and looking to cash out. Meanwhile, with numerous firms seeing their growth level off after the 2007-2009 recession, many of them see acquiring others as a route to adding new specialties or markets, said Mark Koziel, vice president of firm services and global alliances for the AICPA.

Whether all these mergers will mean fewer, but larger, accounting firms dominating a market is somewhat up in the air.

"The math isn't so symmetrical that one plus one equals one bigger one," Koziel said. "One plus one equals three to five. Two firms merge, maybe there were some partners who weren't invited in. They kind of go out and start their own firm."

But the accounting labor pool is not big enough to fill all the holes being left by the retiring Baby Boomers, he added. "There's physically not enough people people for full replacement of Boomers."

Bonadio said that with his firm being one of the few in the country with a funded retirement plan for partners, "I'm literally getting a call a week. All the firms looking to be acquired are going to at least come and talk with us."

And the vetting process can be lengthy, with talks with Gaines Kriner starting three years ago, Bonadio said.

"It starts with (the other firm's) culture," he said. "If their culture is similar to ours and they have the same type of value system, trying to grow, taking care of their people, then we have a basis to talk. If they don't have a similar culture … we probably don't get past the first or second date."

Today, including the 88 people added with the Gaines Kriner merger, Bonadio group employs roughly 475.

When Bonadio Group first entered the Buffalo market a dozen years ago, "There was no intent we were going to do just one merger," Bonadio said. "But we had to get a foothold."

Now, with roughly 140 people in the Buffalo area, "we have a much more dominant position (and) and the ability to get good work and good people increases exponentially. When you're dominant in a market, there are very few opportunities in the Rochester market we don't get a look at because we're a major player. We're on the list if someone's looking for a quality CPA firm. Now in Buffalo ... anyone looking to change CPAs or consulting firms, they're probably going to at least talk to us. That wouldn't have happened when we were 40 or 45 people. We want to be Coke or Pepsi in every market were in."

Bonadio likely will be a Top 50 firm, with revenues exceeding $70 million, next Top 100 rankings, he said.

"Dating is always going on," he said. "(Syracuse) is one of the upstate markets were focusing on. We're also focusing on Manhattan — we wouldn't be a dominant player, but we have significant clients. We have goals in each of our markets to be the dominant player."

The list singles out individuals who demonstrate particularly notable qualities and characteristics as heads of CPA firms. Bonadio was cited for the company's extensive strategic planning and for its overall growth from a firm with $100,000 in annual revenues to, today, $54 million.

"It's very humbling," said Bonadio, 64. "I had no idea it was even happening — my people filled (the nomination) out. I was born on Bay Street. I was educated at St. John Fisher. I never left Rochester my whole life. To be on a national stage like that, it blows me away."